The Benelux Countries: Identity and Self-Interest
Erik Jones
Johns Hopkins Bologna Center
a draft chapter prepared for
Simon Bulmer and Christian Lequesne, eds.
Member States and the European Union
Oxford: Oxford University Press (forthcoming)
May 2003
word count: 9650
List of Abbreviations
CAP
ECSC
EDC
EEC
EMS
ERP
EU
GDP
NATO
OECD
OEEC
SGP
WEU
Common Agricultural Policy
European Coal and Steel Community
European Defense Community
European Economic Community
European Monetary System
European Recovery Program
European Union
Gross Domestic Product
North Atlantic Treaty Organization
Organization for Economic Cooperation and Development
Organization for European Economic Cooperation
Stability and Growth Pact
West European Union
The Benelux Countries: Identity and Self-Interest
Erik Jones
The purpose of this chapter is to analyze the relationship between the European Union and the Benelux
countries–meaning Belgium, the Netherlands, and Luxembourg. The argument is that for each of these
countries, participation in European integration originated as an act of national self interest. However, it
developed into a facet of national identity. Along the way, conceptions of self-interest changed as well.
The process is untidy and yet the general principle is straightforward. Participation in Europe changes
the member states even as the member states create and change the institutions of Europe. The end
result of this circular relationship is ambiguous. Belgium, the Netherlands, and Luxembourg are
transformed but they do not disappear. They share a common identity and yet they remain different
countries, each distinctive in its own way.
The chapter is organized in five sections. The first analyzes integration in the Benelux as a
harbinger or precursor for integration in Europe. The second examines the preferences and politics of
the Benelux countries as participants in European integration up to the mid-1960s. The third sets out the
domestic distributive consequences of participation from the 1960s onward. The fourth looks at the
institutional implications, again from the 1960s onward. The fifth returns to the question of preferences
and politics and concludes with some suggestions about what the experience of the Benelux countries
implies about the process of Europeanization more generally.
Identity and Self-Interest
As a starting point, it is worth noting that the choice to treat the Benelux countries as a single unit for
analysis is more reflective of the need to hold down the number of chapters in this volume than of any
strong assertion that the Benelux countries are all alike. Nevertheless, the choice to group the Benelux
countries together is not arbitrary. Belgium, the Netherlands, and Luxembourg share the same
geographic space–known generically as the ‘Low Countries’. They have shared a special economic
relationship for more than half a century. And, of Europe’s smaller countries, they have the longest
experience of integration.
Still, the irony is that the three countries are actually very different from one another. Take
language, for example. Like most countries in Europe, the Dutch speak a single language–called
‘common civilized Dutch’–albeit with a moderate-to-strong dialectical variation from South to North
and from West to East. People from Amsterdam (which is toward the northwest) can understand
people from Maastricht (which is in the southeast), however the people from Maastricht can make it
difficult if they choose. The Belgians are divided by language, with the northerners speaking Flemish
varieties of the Dutch and the southerners speaking Walloon French.1 The capital of Belgium, Brussels,
is officially a bilingual city French/Dutch. Even there, however, visitors are quick to note that the
shopkeepers tend to prefer one language over another. Finally, the Luxembourgers are polyglot. They
are educated in French and German, they use French as their official language, and they speak their
own German dialect–Lëtzebuergisch–at home. This multilingual education is actually a clever strategy
for keeping Lëtzebuergisch alive. So long as everyone is equally well-trained in French and German,
no-one need feel they are disadvantaging their children by speaking to them in dialect.
1
There is also a very small community of German speakers in the eastern-most part of Belgium
who were ceded to the country as part of the territorial settlements at the end of the Second World
War.
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Political Identity
The point to note is that such linguistic differences are more political than ‘organic’. The people who live
in Low Countries have long spoken a variety of languages and dialects–just as everywhere else in
Europe. However, in contrast to countries such as France, Germany, or Italy, the Low Countries were
never subject to linguistic homogenization as a group–and not for wont of opportunity. At the start of
the 19th Century, the Great Powers cobbled together the Low Countries under the Kingdom of the
Netherlands in order to create a viable buffer between France and Germany. It was the end of the
Napoleonic Wars, the Concert of Europe was just asserting itself, and the ‘balance of power’ provided
the organizing principle for the European state system. A single Kingdom of the Netherlands could not
defend itself against a resurgent France or a united Germany. However, it could do reasonably well
against a downtrodden France and a fractious cluster of German principalities. Hence the Dutch king,
William of Orange, set about unifying the different parts of the Low Countries economically, politically,
and, after 1819, culturally and linguistically as well (Bernard 1961).
The problem was that the Belgians did not enjoy being under the tutelage of the House of
Orange, for religious as well as linguistic reasons. The Belgians were more Catholic than Protestant in
addition to being more likely to speak French than Dutch. For their own part, the Luxembourgers
preferred existence as a sovereign duchy than as a dependent province. Culturally, they felt more
attuned to France or Germany than to the Netherlands. The Belgian revolt of 1830 put an end to the
united Kingdom of the Netherlands and the Treaty of London in 1839 restored the sovereignty of the
Grand Duchy of Luxembourg. Luxembourg and the Netherlands remained in a personal union, with the
King of the Netherlands being also Grand Duke of Luxembourg. However, by the end of the 19th
Century even this union fell apart as a woman (Wilhelmina) ascended to the Dutch throne but was
prevented from becoming Grand Duchess. (Up to that point the rules governing succession in the
Luxembourg permitted only men to inherit titles; within less than two decades, the rules were changed to
extend this privilege to women as well). The House of Orange retained control over the Grand Duchy,
but along a different branch of the family from that residing in The Hague. In this way, the last vestiges of
the post-Napoleonic Kingdom of the Netherlands were undone, and the promise of economic, political,
and cultural unification along with them (Bernard 1961; Weil 1970).
Environmental Self-Interest
The Low Countries chose not to remain unified and yet they could not escape the dictates of geography
or of the European state system (Eyck 1959). They preferred not to live together, but they could not
prosper easily alone. Hence, for much of the early 20th Century, relations between the three small
countries alternated between cordial and fractious. Throughout, it was self-interest that drove the
countries together and identity that pushed them apart. To give an example, the people of Luxembourg
acknowledged that they would have to join in an economic union with some larger country in order to
remain viable after the First World War. Given the choice in referendum, however, the Luxembourg
population voted overwhelmingly for union with France. Britain resisted such a union and France
demurred. Belgium offered the only other alternative, and the 1922 economic union between Belgium
and Luxembourg was the result (Bernard 1961: 690-691; van Meerhaeghe 1987).
The Benelux as an organization has similar origins. During the Second World War, the political
leaders of the three small countries found themselves together in exile in London. They realized that
some formal relationship between their economies would be better than going it alone. And yet they
feared that domestic opposition would scupper any attempt to negotiate a union during the period of
reconstruction that was sure to follow the war. Hence they decided to negotiate the terms of the
Benelux union before the war ended and under the exceptional power they retained as leaders in
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wartime. In this way, the union would be a fait accompli (Spaak 1969: 150-152). As it turned out,
their reasoning was well-founded. Not only did the Benelux countries implement their union only slowly
after the war, but they also had to fend off a number of competing but less universally acceptable
proposals from France and Italy–with names such as ‘Fritalux’ or ‘Finebel’ (Milward 1984: 306-316).
As an ‘union’, however, the Benelux has been something of a disappointment. The customs
union between the three countries was successful both in opening Dutch markets to exports from
Belgium and Luxembourg after the Second World War and in providing a favorable context for the
belated industrialization of the Netherlands. The currency union proved less robust. The parity between
the Belgian and Luxembourgish franks remained fixed per their earlier agreement, but the exchange
rates between frank and the Dutch guilder moved already by the end of the 1940s. Finally, the
elaboration of common Benelux political institutions had little if any success. As a symbol or aspiration,
the proposal to deepen the institutions of the Benelux in the 1960s may be said to have encouraged
greater enthusiasm for integration via the European Community. But as a practical venture it offered few
tangible results (Weil 1970: 224-231).
Unity with Diversity
The development of the Benelux was tightly circumscribed by the differences in the identities of the three
countries and by the overlap in their self-interest. Admitting that, however, should not imply that either
identity or self-interest have proved immutable. On the contrary, the promotion of the Benelux greatly
increased the pace of exchange between the Low Countries–tightening cultural as well as economic
bonds (Samoy 1981). The fact that it makes sense today to group the Benelux countries together is
testament to the impact that the experience of their union has had on the development of their separate
national identities. Whatever the limits of the union between them, the Benelux countries are now more
than just Belgium, the Netherlands, and Luxembourg. They are ‘Benelux countries’ and as such can be
treated as a case group.
Preference and Policy
The overlap in self-interest lies at the heart of the Benelux approach to Europe up through the 1960s.
For all three countries, the top priority was to ensure that they would benefit from market access. The
problem is that as small countries they were more dependent upon access to European markets than
any of the larger countries of Europe (France, Germany, Italy, the United Kingdom) were dependent
upon the provision of exports from the Low Countries. As a result they had little leverage to secure their
self-interest against the wishes of their larger neighbors. Of course, the Benelux countries were not
unique in this dependence. Virtually all of the small countries of Europe shared the problem of needing
large country markets more than large countries needed them (Katzenstein 1985). However, four
geographic factors–one common, and three particular–make the position of the Low Countries
somewhat unique. The common factor is position: The Low Countries nestle between France,
Germany, and Britain. As a result, they were (almost) symmetrically dependent in a number of different
directions. It was not enough for these countries to have access to one large country or another. Their
self-interest was to have access to them all.
The three specific factors appertain to each of the Low Countries. Belgium included the earliest
industrialized zone on the continent–predominantly located in the French-speaking south of the
country–and so was economically dependent upon mature industries such as coal, steel, and textiles, for
which the danger of market protectionism is particularly acute. A similar point can be made for
Luxembourg, however with the proviso that the Grand Duchy’s economy was so small as to rely almost
wholly upon coal extraction and metal processing. Meanwhile, the Dutch economy centered on
-3-
agriculture, fishing, and commerce. In addition to the country’s large production of meat and dairy
products, the harbors at Rotterdam and Amsterdam provided the principal gateway from the Atlantic
seaways to the European continent. Hence the Low Countries all required access to trade to differing
degrees and for different reasons (Eyck 1959).
Multilateral Market Access
The first major experiment with trade integration came already in the 1930s. Within the context of the
League of Nations, the Low Countries joined with the Nordic countries (Denmark, Finland, Sweden,
Norway) in a tariff alliance–called the Oslo Alliance after the Norwegian capital city where the treaty
was signed. The goal of this alliance was to arrest the movement toward trade protection that coincided
with the onset of the Great Depression. The small countries agreed to consult with each other over trade
restrictions between themselves and to work together in their tariff negotiations with the larger countries
of Europe. The result was less than hoped for. The larger countries refused to join in the Oslo alliance
and worked actively to promote its disintegration. By the end of the 1930s, the Oslo alliance was in
tatters (Van Roon 1989).
Despite this failure, however, the importance of institutionalized collective action became a
cornerstone for the foreign economic policy of the Low Countries (Eyck 1959: 84). The alliance of
small countries may have failed, but at least it offered a chance of success. Moreover, politicians in the
Low Countries made a direct connection between the failure of international economic relations and the
breakdown of international security. Such reasoning is evident in the recollections of Paul-Henri Spaak
(1969: 148-149), a long-time Foreign Minister of Belgium and one of the principal architects of
European integration:
In 1942, my thinking could be stated precisely as follows: ‘There is no political solution without
an economic solution and vice-versa. In the world of tomorrow, particularly in the Europe of
tomorrow, and even more particularly for the small countries of Europe, the problems of
security and prosperity will be indissolubly mingled.’
Spaak went on in his recollections to argue about the need for the creation of supranational
authority over the national governments of Europe–replacing ‘nationalism’ per se with a type of
enlightened ‘internationalism’. However, his admiration for supranationalism was less widely shared
within the Low Countries than was his commitment to the need for collective action between countries.
If there is a common characteristic to the lesson-learning of the inter-war period, it was that regional
integration should be institutionalized around national self-interest in order to succeed. The Benelux is a
case in point that has already been touched upon. However, it is worth outlining the economic situation
at the end of the Second World War in order to illustrate the type of economic exchanges that
international integration makes possible.
Market access and trade lay at the core of the Benelux as an economic bargain. At the end of
the Second World War, Belgium and Luxembourg had large supplies of coal and steel that the
Netherlands could use for reconstruction. The problem was that the Netherlands had little to offer in
exchange. Even worse, Belgium and Luxembourg had ample foreign exchange reserves while the
Netherlands did not. By implication, any trade between Belgium or Luxembourg and the Netherlands
would result in a bilateral imbalance that the Netherlands could not finance. Yet Belgium and
Luxembourg needed to sell their coal and steel and the Netherlands needed to buy them. The Benelux
promised to square the circle by guaranteeing market access in both directions–skewing Dutch exports
toward Belgium and Luxembourg in order to enable the Dutch to finance imports from its two southern
-4-
neighbors. The result was never entirely effective, and hence the breakdown in the fixed exchange rate
between the frank and the guilder by the end of the 1940s. However, the trade diversion did take place
and economic connections within the Benelux tightened rapidly (ERP 1949).
The Schuman Plan
The imprint of national self-interest can also be found in the different reactions of the Low Countries to
Robert Schuman’s May 1950 proposal to create a European Coal and Steel Community (ECSC). As
major coal and steel producers, Belgium and Luxembourg were clearly affected by the proposal.
However, the implications for the two countries were very different. Belgian diplomats expressed
concern that their older industries would be among the first to be phased out as a result of European
competition. Given that these industries were located in the French-speaking south of the country, such
competition would invariably feed into growing political tension between Walloons and Flemings. Hence
the Belgians agreed to the Schuman Plan only reluctantly and on condition that they be allowed to
subsidize coal and steel producers beyond the levels provided by the ECSC and that they also be
permitted to opt out of the agreement in the event that the domestic implications proved unmanageable
(Milward 1992: 46-83).
By contrast, Luxembourg diplomats focused on the planning side of Schuman’s proposal. Their
concern was that Belgium would use the excuse of the ECSC to undermine the privileged access that
Luxembourg producers had to Belgian markets under the terms of the 1922 economic union between
the two countries. The justification for this concern was that privileged access through the BelgiumLuxembourg Economic Union had skewed the export orientation of Luxembourg industries and so
made the excessively dependent upon Belgian markets. (Here already we can see how the experience
of integration has changed the calculation of self-interest.) At the same time, the Luxembourgers noted
that the powers of the High Authority–the supranational body responsible for administering the coal and
steel pool–would give it effective control over the mainstay of the Grand Duchy’s economy. Hence they
demanded guarantees that they would not lose their existing market advantages and that their
sovereignty would not be unduly eroded by the High Authority.2
The reaction of the Netherlands of the Schuman Plan was also ambivalent. Although supportive
of the ideal of an integrated European market, the Dutch were deeply suspicious of the delegation of
national responsibilities to a supranational agency such as the proposed High Authority. Such an agency
would be likely to be coopted to serve the interests of large countries rather than small, and would offer
little or no protection to Dutch national interest in any event. Hence the Dutch insisted on the creation of
an intergovernmental Council of Ministers to oversee the actions of the High Authority and to safeguard
the national interest of the member states (Griffiths 1980: 278-279).
Toward the Common Market
Despite the ambivalence of the Low Countries regarding the ECSC, their enthusiasm for European
economic integration was unmatched. The Dutch were particularly energetic in coming up with ideas.
Soon after the announcement of the Schuman Plan, the Dutch Foreign Minister, Dirk Stikker, proposed
2
Evidence for this point can be found in a brilliant website assembled by University of Leiden
professor Richard Griffiths. The commentary on the site is available only in Dutch; the documents are in
original languages. The specific document used here is a memorandum to the Luxembourg Minister of
Foreign Affairs and dated 7 December 1950. The URL for the website is:
http://esf.niwi.knaw.nl/esf1997/projects/schuman/we/welkomframe.html.
-5-
that the countries of the Organization for European Economic Cooperation (OEEC–an institutional precursor to the OECD) engage in an aggressive liberalization of European trade by sector. Weeks later,
his counterpart at the Dutch Ministry of Agriculture, Sicco Mansholt, proposed the creation of a
European Agricultural Community along much the same lines as the ECSC. Neither of these proposals
came to fruition–although the Mansholt proposal arguably survived in the Common Agricultural Policy
(CAP) of the European Economic Community (EEC) if only insofar as Mansholt himself was the first
European Commissioner for Agriculture (Milward 1984: 446-454). Such failings only underscore a
harsh reality identified by Charles Kindleberger (1986: 298) in his analysis of the Great Depression:
Even ‘the most sensible proposals emanating from small countries are valueless if they lack the capacity
to carry them out and fail to enlist the countries that do.’
The experience of a further Dutch initiative bears this out. During the ill-fated deliberations over
the creation of a European Defense Community (EDC 1951-1954), another Dutch Foreign Minister,
Willem Beyen, proposed that the members of the ECSC form a common market. His reasoning echoed
the sentiments of his Belgian counterpart, Paul-Henri Spaak (cited above). Security integration must be
underpinned by economic integration in order to function, because only economic integration can ensure
the political union of those countries aspiring to create an EDC. More important, however, the Beyen
Plan signaled the determination of the Netherlands to keep the issue of market access on the European
agenda. And while the collapse of the EDC brought down the Beyen Plan as well, the proposal to
create a European customs union and common market remained embedded in the integration process
(Griffiths and Milward 1986).
Within less than a year from the end of the EDC deliberations, the members of the ECSC
agreed to return to the question of market access. In their declaration at Messina (1955) they
announced:
The governments of the Federal Republic of Germany, Belgium, France, Italy, Luxembourg and
the Netherlands believe the time has come to take a new step on the road of European
construction. They are of the opinion that this objectives should be achieved first of all in the
economic sphere.
They believe that the establishment of a united Europe must be achieved through the
development of common institutions, the progressive fusion of national economies, the creation
of a common market, and the gradual harmonization of their social policies.3
Support for Supranational Authority
The progression from the Messina declaration to the Treaty of Rome is well-known and fits comfortably
within the national interest of the Low Countries as described above. However, one element of initial
Low Country preference remains to be explained. During the ECSC, both Luxembourg and the
Netherlands expressed concern about the supranational High Authority–with the Netherlands insisting
even that the ECSC be endowed with an intergovernmental Council of Ministers. As Richard Griffiths
(1980: 279) notes: ‘Interestingly, there is no sign, at this early stage, of the belief in supranationalism that
was later to become the hall-mark of the Dutch approach’.
The change in attitudes centers around the negotiation of the French Fouchet Plan (1960-1962)
and the concomitant first British application for EEC membership (1961-1963). The two episodes are
3
The text of the Messina Declaration can be found at another website hosted by Richard
Griffiths. The URL is http://www.let.leidenuniv.nl/history/rtg/res1/messina.htm .
-6-
not directly linked. However they are connected through the relationship between the larger and smaller
member states. The Fouchet Plan was a French proposal to broaden the scope of European integration
into a number of different functional areas–foreign policy, defense, economics, and culture–each of
which would be endowed with its own administrative organization much like the European Commission
served the common market. The center of gravity in this new system would be the Council of Ministers
and by implication the separate supranational authorities would have little scope for autonomy. This
arrangement would seem to be in keeping with Dutch attitudes as revealed in the ECSC negotiations
and yet the Netherlands emerged as an immediate and steadfast opponent of the proposal (Silj 1967).
Dutch opposition rested on two concerns. First, European defense cooperation would
undermine relations between Europe and the United States within the North Atlantic Treaty
Organization (NATO) and it would also undermine cooperation with Britain, which was in NATO and
the West European Union (WEU)–effectively the European pillar of NATO–but which was not a
member of the EEC. Second, any organization dependent upon a Council of Ministers that included
only the six original EEC member states could too easily devolve into a Franco-German condominium
at the expense of the smaller countries. This position is entirely consistent with the earlier objection to
the ECSC. Having a supranational agency that is implicitly captive to the interests of large countries is
bad for small country interests. Having an intergovernmental arrangement that is explicitly dominated by
large countries is worse.4
The Dutch strategy for opposing the Fouchet Plan had two components: support for British
entry in the EEC; and insistence that the European Commission remain the singular and encompassing
supranational authority for the Community. Initially, the Dutch were isolated in their opposition.
Although they would have preferred to have Britain in the EEC and to retain a strong supranational
check on Franco-German dominance, Belgium and Luxembourg were initially willing to support the
Fouchet Plan. However, as French opposition to British entry became clear and as De Gaulle became
more demanding in the Fouchet negotiations, Belgium and Luxembourg swung their support behind the
Dutch (Silj 1967; Jones 1993: 114-121).
The Fouchet negotiations collapsed and the EEC moved into a period of conflict and relative
stagnation–marked by the French vetos of British accession (1963 and 1967), the empty chair crisis
(1965), and the Luxembourg compromise (1966). However, the Low Country position within the EEC
was secure. France and Germany did not dominate the Council of Ministers. The Commission was
strong enough to check the Council but not so strong as to override the national interests of even the
smaller member states. And progress toward the extension of market access across a wide range of
sectors was running ahead of schedule. The question to consider then is what impact this had on the
Benelux.
Distribution and Adjustment
The economies of the Benelux countries changed dramatically during the period from the 1960s through
the 1990s. In Belgium, the balance of wealth shifted from South to North, with the Flemish-speaking
provinces becoming the new center of gravity for politics and economics. Meanwhile, the mature
industries of the Walloon South stagnated and coal mining disappeared entirely. Luxembourg developed
4
As Christian Franck (1983: 86-87) points out, this interpretation does not rely on an implicit
understanding among the smaller countries. Indeed, the advantage of supporting the Commission against
the Council is precisely that it supports small country interests even when a coalition of the smaller states
cannot be formed.
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as a financial center, it attracted a large immigrant workforce, and it consolidated its position as host to
a number of large European institutions. The Netherlands enjoyed a brief period of manufacturing
success but then returned to its origins as a predominantly service-sector economy. At the same time,
Dutch agriculture flourished and consolidated, becoming not only among the most productive food
exporters in Europe but also one of the most heavily capitalized.
The difficulty lies in determining how much (if any) of such transformations should be attributed
to European integration per se. The balance of wealth and power in Belgium was shifting northward
before the onset of the Second World War and per capita grew faster in Flanders than in Wallonia from
1948 to 1959 (Chaput and de Falleur 1961: 186). The migration of foreign workers to Luxembourg is
a long-standing development as well. What is more, any progress that the Grand Duchy has made as a
financial center is at best only equal to (at least in relative terms) that achieved by Switzerland and
Liechtenstein despite their being outside the European Community (now Union). Finally, the renewed
service sector emphasis of the Dutch economy only mirrors developments elsewhere. Hence if there is a
clear beneficiary of European integration it is Dutch agriculture. Given the role that the Dutch played in
shaping the CAP, it would be surprising if it were otherwise.
The difficulties of estimating the precise impact of Europe are not unresolvable. But their
resolution is more complicated than necessary to chart the broad contours of the EU-member state
relationship. Indeed, the scholarly literature has focused primarily on three questions: Has European
integration benefitted capital more than labor? Does it constrain macroeconomic strategies to focus on
stability rather than growth? Or is the effect of European integration really to enhance rather than to
diminish the capabilities of the member states? The first two of these questions are independent but
complementary. Europe can be either pro-capital or pro-stability without necessarily implying the other,
and it can be both pro-capital and pro-stability without giving rise to contradiction. The third question is
exclusive because it changes the frame of reference. If Europe enhances the capabilities of the nationstate, then the state can be pro-capital or pro-stability, but European integration cannot. Otherwise, so
soon as state policymakers changed their attitudes toward either capital-labor relations or the trade-off
between growth and stability, they would find their autonomy constrained by Europe and not enhanced.
Integration and Business
Paulette Kurzer (1988, 1993, 1997a) is the most forceful proponent of the argument that European
integration has privileged capital over labor, particularly as it applies to Belgium and the Netherlands.
The force of her claim rests on three propositions. First, market access facilitates the direct foreign
investment of large multinational corporations, many of which were attracted to the Low Countries at
the start of the European Communities in the 1960s. Roughly one-quarter of all United States
investment into the EEC during the 1960s went into the Low Countries, and foreign direct investment
into Belgium accounted for as much as one-half of the country’s net capital formation (Van Rijckeghem
1982: 592-593). These foreign firms represented a new political force for the governments of the Low
Countries to have to take into consideration. Second, market access works the other way as well,
making it easier for domestic firms to move their production facilities abroad without losing their position
with domestic consumers. In this way, domestic firms became politically more powerful because they
could use the threat to move production abroad as a lever to manipulate government policy. Third, the
liberalization of international capital flows in the late 1970s and 1980s, strengthened the first two forces
by making it easier for firms to enter the Low Countries and easier for them to exit as well. Beyond that,
capital market liberalization also gave rise to ‘international finance’ as a separate power with which the
governments of the Low Countries had to contend. Banking become an economic mainstay in
Luxembourg during the 1980s (Hey 2003: 81), and banking interests moved to the center of monetary
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policymaking in Belgium and the Netherlands as well (Kurzer 1988).
Kurzer (1993) uses this argument about the pro-business bias of European integration to
explain why social democracy in the Low Countries has fared less well than it has in either Austria or
Sweden. As business and financial interests have grown in importance, the rights and privileges of the
working classes have been downgraded. This is most evident in the pressure to reform public
expenditures and labor market regulations. It is also evident in the gradual shift in the distribution of
value-added from labor to capital that took place in Belgium and the Netherlands during the 1980s and
1990s.
A Pro-Stability Bias?
The macroeconomic constraints implied by European integration emerge from similar factors and
particularly from the free movement of capital across national borders. The force of the argument
derives not from the intentions of any specific group–say, business versus labor. Rather it emerges from
the unintended consequences of the capital flows themselves. Mobile capital creates volatility in foreign
currencies, international trade, public expenditure, and national output. This volatility in turn has
profound implications for virtually everyone in society (Strange 1986, 1997). The European response to
this volatility has been to tighten the institutions for exchange rate coordination, first through the
European Monetary System (EMS) and later through the creation of a single European currency, the
euro.
Kenneth Dyson (2000) argues that one effect of monetary integration is to change the structure
of policy-relevant values in participating countries. The politicians and policymakers who join the
monetary union do more than just reject the volatility of international capital markets and they do more
than simply aspire to stability per se. Such politicians and policymakers ultimately come to embrace the
particular notion of stability that underwrites the European single currency and to accept the importance
of adhering to rules and procedures in order to bring that stability about. Specifically: they accept the
numerical ceilings for acceptable debts (60 percent of gross domestic product [GDP]) and deficits (3
percent of GDP) as set down in the excessive deficits procedure of the Treaty on European Union; they
accept the medium-term commitment to achieve a budgetary position that is close to balance or in
surplus as required in the Stability and Growth Pact (SGP); and they accept the multilateral enforcement
and monitoring procedures that underwrite these commitments (Jones 2002b: 35-57).
Dyson (2002: 359-366) leaves open whether this conception of stability necessarily privileges
business over labor. Indeed he suggests that the opposite may be the case. The goals and procedures
that underwrite European stability may be more useful for shoring up the welfare state than for
dismantling it. What matters for Dyson is simply that the commitment to stability is normative and
recursive. The more countries want rule-based stability, the more they come to believe in its necessity.
Writers like Kurzer (1997b) and Verdun (2002) are skeptical that any such pro-stability bias in
the Low Countries actually emanates from the process of European integration. They admit that Belgium
and the Netherlands are committed to macroeconomic stability and to fixed exchange rates. However,
they note that these commitments pre-date the process of integration in Europe. Hence, they suggest, it
is more likely that Belgium and the Netherlands inculcated these values at the European level than the
other way around. What is more, both Kurzer and Verdun note that fiscal policy was never so tight in
Belgium or the Netherlands as the architects of the EMS and the single currency would have liked. Any
reform of the welfare state that did take place emerged only piecemeal, and was not part of some
wholesale conversion to the values of macroeconomic stability as set out in the European Union’s
excessive deficit procedure or SGP.
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Rescuing the Nation State
This debate over the normative influence of monetary integration brings discussion of the Low Countries
into the framework suggested by Peter Katzenstein (1985). In his Small States and World Markets,
Katzenstein argued that small states like the Low Countries survive (even flourish) in world markets by
combining international integration with domestic forms of compensation, which is to say a strong
welfare state. The Low Countries fit this pattern very closely. As they entered into first the Benelux and
then the European Communities, all three countries established domestic institutions to protect both
labor and industry from the shocks and volatility that are inherent in opening up to world markets. In
other words, the social welfare institutions in these countries exist to compensate for the costs of
integration. Hence there is no surprise in finding that the Low Countries would be slow to implement
welfare state reform even as integration progressed.
The interesting question is how the Low Countries have managed the tensions between
integration in world markets and generous welfare state institutions. Here we should accept that
Kurzer’s argument about the pro-business bias of European integration has some merit. The competitive
forces both in European and world markets do pose a number of challenges for the functioning of
welfare state institutions. Demographic changes, ranging from declining birth rates to increasing lifespans, pose problems as well. To assume that Belgium and the Netherlands could avoid having to
respond would be unrealistic (Hemerijck and Visser 2000). Even tiny Luxembourg is not impervious to
the inexorable forces for welfare state reform (Osborn 1999).
At least part of the answer to the question of reconciling integration and the welfare state was
found in using the requirements for integration in Europe as an excuse for undertaking otherwise
necessary reforms. Hence, coalition governments in both Belgium and the Netherlands justified fiscal
consolidation as being necessary to prepare for entry into the single currency (Jones 1998a, 1998c). To
an even greater extent, however, the answer was found in pursuing ever deeper forms of European
integration in order to stave off the requirements for domestic economic or political adjustment. This is
the essence of Alan Milward’s (1992) argument about the European Rescue of the Nation State. And
it has particular resonance for the Benelux.
The Low Countries used market access to increase export earnings and promote
industrialization. They used exchange rate coordination to stabilize the foreign trade developed within
the Common Market. They supported the elimination of non-tariff barriers to trade in the 1980s in
order to foster greater European competitiveness versus third countries such as the United States or
Japan. They saw capital market liberalization as a means to escape the liquidity constraints operating on
small countries. And they relied on monetary integration to moderate the volatility implied by liberalized
capital markets. At each step in the process, the goal was not to strip away the powers of the state.
Rather it was to strengthen the capabilities of the state initially to expand, then to protect, and then shore
up the provision of social welfare. That some welfare state reform took place should not necessarily
imply that an adverse European bias is at work. It may only suggest that the strategy of pursuing
integration was insufficient to the challenge at hand (Jones forthcoming).
Institutions and Adaptation
The problem with assertions that European integration has somehow ‘rescued’ the Benelux countries is
that they gloss over the many and difficult adjustments required within the integration process. In general
terms, countries must adapt to the institutions, norms, and procedures of multilateral decision-making. In
specific terms they must implement and enforce the legislation passed at the European level. Neither
aspect of adjustment is easily accomplished, and both strain domestic political institutions and practices
(Peterson and Jones 1999: 37-41).
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By most accounts, the Benelux countries have been much better at the general than at the
specific. While widely regarded as effective negotiators, neither Belgium nor the Luxembourg has
amassed a strong record in the transposition of European Union (EU) legislation into national law
(Beyers, Kerremans, and Bursens 2001: 72-73). Poor transposition used to be a problem in the
Netherlands as well, but was eliminated through an overhaul of Dutch implementation procedures at the
start of the 1990s (Harmsen 1999: 101-102). The conclusion to draw from this is simply that being a
good European citizen does not come naturally even in the smallest member states or in those with the
longest record of participation.
The challenge is to identify the magnitude of adjustment implied by the integration process, the
structure of the political interests surrounding the adjustment process, and the resulting pattern of
adaptation. In the scholarly literature, such concerns are bracketed within the larger context of
‘Europeanization’–understood broadly to encompass virtually the whole of the EU-member state
relationship (cf. Olson 2002). This literature focuses predominantly on institutional concerns. From this
institutionalist perspective, the magnitude of adjustment derives from the ‘goodness of fit’ between
national and European institutions (Börzel 2002). The structure of political interests is contextually
specific (Börzel 1999: 577-580). And the pattern of adaptation depends upon a ‘logic of
appropriateness’ inherited from pre-existing political and social institutions (Harmsen 1999: 85; see also
Petersen 1998).
Goodness of Fit
The Benelux countries would seem to be a good fit with the practice of policymaking at the European
level. Among students of comparative politics, Belgium and the Netherlands illustrate type cases for
consensual democracy. Luxembourg also has a strong reputation for institutionalized consensus building.
And, the European Union relies on consensus as well. With its complex legislative procedures, supermajoritarian voting rules, and multiple reinforcing political cleavages, the European Union is arguably
even more dependent upon consensus than any of the member states–the Benelux countries included.
The irony is that consensus politics is more problematic than helpful in dealing with the European
Union. Consensual institutions imply that a large number of actors must be involved in the formation of
any national position. The coordination of these many views is a daunting challenge in its own right. The
reconciliation of competing interests is more problematic still. Such coordination is possible, but it is
complex (Beyers, Kerremans, and Bursens 2001). Hence private interests in the Netherlands prefer to
lobby the European Union outside the official channels managed by the government (Van Shendelen
1993). Private interests in Belgium channel their demands directly through the country’s Permanent
Representative, who helps them to network with other interested parties at the European level and
without recourse to the Belgian state (Pijnenburg 1993: 171-172). Such broad use of the Permanent
Representative is not necessarily a weakness. However, it does imply that Belgium has to take great
care in the selection and maintenance of its representation to the EU despite the fact that the Belgian
Ministry of Foreign Affairs is only blocks away from the European Commission (Kerremans and Beyers
2001).
Excessive resort to consensus also has a negative effect on the ability of the Benelux countries
to implement EU legislation. The more complicated the mechanism for transposing European legislation
into national law, the slower the process of transposition and the more susceptible it becomes to
backlog. This is the most often cited explanation for the relative failings of Belgium on the
implementation side of its relations with Europe (cf. Kerremans and Beyers 1998). Legislative
complexity also used to be a major factor behind the weakness of implementation in the Dutch case
(Hoetjes 1996: 164).
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As in the Netherlands, the Belgian government attempted to streamline its procedures in order
to improve performance (de Wilde d’Estmael and Franck 1996). However, it was unable to overcome
the demand by different groups in Belgian politics for adequate representation. The Netherlands was
more successful. Yet this success in reforming the implementation of EU legislation has given rise to
concern in the Netherlands that the state is infringing on the rights and privileges of civil society. Whether
such concerns will become problematic remains to be seen. Whatever the outcome, moving away from
consensus does impose a cost. And the more deeply consensus is embedded in the country, the higher
the cost becomes. Hence, ‘in the Netherlands . . . it is the autonomy of society, not the sovereignty of
the state, which may ultimately prove to be the fault line at which supranational integration could
stumble’ (Harmsen 1999: 105).
The difficulty in Luxembourg is not too much consensus so much as it is too few people. The
small number of government officials actually makes it much easier to coordinate policies through the
state. However, it also makes it more difficult to transpose and implement EU legislation in a timely
manner. Luxembourgish officials have to run to stay in place. Hence, their relatively poor performance
actually constitutes quite an achievement. In contrast to the attitudes prevalent among Belgian
bureaucrats, the Luxembourgers are pleased with their record for transposition (Beyers, Kerremans,
and Bursens 2001: 88 fn 49). The point remains, however, that the fit between Luxembourgish and
European institutions is not as good as the simple correlation of consensual characteristics would
suggest.
Interest and Institutional Context
But institutions can be changed. The difficulty is that most institutional innovations–in the Benelux
countries as elsewhere–take place for reasons that have little to do with the process of European
integration. Some such developments may complement Europeanization. Others may work against it.
For example, each of the three Benelux countries has undergone and important transformation during
the past four decades. Belgium has witness the rise of linguistic conflict and the subsequent federalization
of political authority. The Netherlands has experienced a pluralization of domestic politics and a
weakening of formal political institutions. Luxembourg has seen its economy changeover from a heavy
reliance on steel manufacturing to an equally heavy reliance on banking and finance. The question to
consider is whether these changes have made it easier or more difficult for the governments of the
Benelux countries to participate in the European Union.
The federalization of Belgium has certainly made matters difficult. This is true in part because a
federal Belgium includes many more formal actors who wish (indeed, who are obliged) to be involved in
the process of European integration. On those matters where the Belgian regional governments are
sovereign, such as public transport, the regional governments actually represent the Belgian ‘state’.
However, it is also true because politicians in the regional governments have attempted to use the
European Union as a lever in the competition for national resources. At one point during the 1990s, for
example, a Flemish bus manufacturer (Van Hool) tried to overturn a Walloon public procurement
decision on the grounds that it violated European law. The fact that the European Commission agreed
with Van Hool and its representative in the Flemish regional government only made matters more and
not less complicated. The Commission had no powers to direct the Walloon regional government and
could only refer matters to the courts. Meanwhile, the Belgian federal government could not intervene
because public procurement is a matter of regional authority. By the time the European Court of Justice
intervened, the procurement process was already completed (Jones 1998b: 154).
The pluralization of Dutch politics has had a more ambivalent effect. During the early years of
European integration, politics in the Netherlands was controlled by political parties rather than by the
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government per se. Political elites commanded a certain deference from the electorate and,
correspondingly, had a reasonable amount of leeway in conducting multilateral negotiations. With the
pluralization of Dutch politics, however, the control of the political parties has weakened and the
deference accorded to political elites has evaporated. By implication, the government has become
relatively stronger and more decisive. However, the electorate has become less docile and more
challenging. The strength of the government makes it possible for the Netherlands to be more successful
in implementing EU legislation as suggested above. However, the weakening of elite control has given
rise to increasing electoral volatility. The May 2002 elections witnessed unprecedented turmoil in Dutch
politics (Jones 2002a). And the campaigns leading up to the January 2003 elections saw a growing
ambivalence among many political parties in their attitudes toward European integration.
The growth of the Luxembourgish financial industry is problematic as well. Much of the money
deposited in Luxembourg comes from the other member states of the European Union. The motivation
of the depositors is to avoid paying tax. Hence much of the European Union would like to see
Luxembourg change its regulations as they apply both to banking secrecy and to the taxation of interest
income. Because it fears such changes would drive away business, the Luxembourg government
refuses. How long they can continue to refuse and still remain in the good graces of the European Union
remains to be seen (Hey 2003: 80-83).
Idiosyncrasy and Persistence
In the previous example, the politics of Luxembourg has altered very little over time. Industrial
dependence has changed over from industry to banking, but the political constitution of the country has
changed little if at all. Meanwhile, Belgium has transformed itself from a centralized unitary state into a
decentralized federation, and the Netherlands has moved from a highly structured consociational
democracy to a highly volatile pluralist one. The question to consider is which of these cases is the odd
one out. Put another way, all three of the Benelux countries have participated in European integration
during the past half century and only Luxembourg remains politically unchanged: Does that make
Luxembourg the exception or the norm?
The question hinges on a false dichotomy. The reality is that all three Benelux countries are
equally idiosyncratic in their political development. The reason is that political development is sensitively
dependent upon initial conditions, on context, and on what institutionalists refer to as historical path
dependence. Despite the common forces of Europeanization, the politics of European countries has
grown little more alike if at all. Indeed the developmental trajectories followed by European countries
over the past decade are almost all different from one another (Anderson 2002).
Perhaps the Benelux countries remain different because of their participation in the European
Union. Of course, it would be convenient if the persistence of idiosyncracy could be marked down to
the work of factors external to the process of European integration. Then we could retain a convergent
notion of Europeanization while at the same time conceding the divergent effect of exogenous factors or
stochastic shocks. However, it may be true that European integration is itself a source of diversity. This
could happen if European integration were to make it possible for countries to sustain outmoded
industrial sectors, such as coal in Belgium. It could happen through incentives to specialize according
along lines of comparative advantages, such as agriculture in the Netherlands. Or it could happen by
removing the institutional supports for an area of existing specialization, such as finance in Luxembourg.
Diversity could also take the form of encouraging political centralization (Netherlands), decentralization
(Belgium), or overload (Luxembourg). The end result of such forces would be to make the Benelux
countries less alike and not more; rendering them less likely as objects for analysis as a group.
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Self Interest and Identity
More than ever in their history, however, the Benelux countries share a common identity–as Benelux
countries and as EU member states. This common identity does not transcend national self-interest. But
it does shape conceptions of self-interest. To give an example, much of the political ambivalence toward
European integration expressed by Dutch political parties in the Autumn of 2002 was directed at the
Common Agricultural Policy. Their concern was not that the CAP would be reformed, but rather that
the reforms would not be sweeping enough. Far from being worried about the state of their farmers,
Dutch politicians are concerned about the costs and distortions that will arise from the enlargement of
the European Union to the East.
This common identity is experiential and not accidental. It does not emerge despite the diverse
effects of European integration. Rather it is a result of the common need to manage these effects.
Europeanization is nowhere the same. The fact that Europeanization is a challenge to be dealt with is.
The Benelux countries have a long history of advocating and participating in European integration. That
history began as an act of self interest. But that history soon took on a meaning and significance all its
own. Just as the political development of the Benelux countries is historically path dependent, their
identities are grounded in past experience. No matter what the material effects of that experience, the
fact remains that European integration has been shared as a process. The fact that participation in
Europe offers advantages has been shared as well. And so has the fact of Europeanization itself. In this
sense, integration in Europe has been much more powerful as a source of identification than was union
within the Kingdom of the Netherlands. As a result, Belgium, the Netherlands, and Luxembourg share a
common identity even while they remain different countries, each distinctive in its own way.
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